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Is commission income Retirement Funding Employment Income?

09 June 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: In the case of pure commission earners, is commission income classified as Retirement Funding Employment Income if the employer has no pension fund and the employee only contributes towards a retirement fund and not a pension fund?

Most commission earners are not affiliated with a pension fund, neither do their employers provide for them to belong to a pension fund. 

Should their income not then be seen as Non-Retirement Funding Employed income per the 1 March 2016 definition commencement of ""retirement-funding employment” in section 1 of the Income Tax Act?

A: The relevant parts of the definition of ‘retirement-funding employment’ is that it means: "in relation to any employee or the holder of an office (including a member of a body of persons whether or not established by or in terms of any law), who—

i) in the case of such employee, derives in respect of his employment any income constituting remuneration as defined … and is a member of or, as an employee, contributes to a pension fund or provident fund established for the benefit of employees of the employer from whom such income is derived…” 

The fact that the person receives remuneration (and commission is remuneration) is not sufficient to make it ‘retirement-funding employment’ – the recipient must also be a member who contributes to a fund established for the benefit of employees of the employer from whom such income is derived. 

We accept that the fact that you say "the employer does not contribute towards a pension fund for their employees” indicates that the fund was not established for the benefit of employees of the employer. 

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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